13 Nov 2019 Finance Bill Passes Second Reading at the Senate

The 2019 Finance Bill passed its second reading at the Senate on Wednesday 8 October 2019. The bill is expected to promote fiscal equity and raise revenue for government amongst other things.
The proposed changes in the finance bill will cover majority of the tax laws in existence at the moment and it is expected to be enacted by the National Assembly at the same time as the passage of the 2020 National Budget and the 2020 Appropriation Act.
We have highlighted below, a summary of some of the proposed changes to the tax laws by the finance bill:

Value Added Tax

Section 4: Rate of VAT

Increase in VAT rate from 5% to 7.5%.

Section 10: Non-Resident Companies

Introduction of “place of supply” rules for goods and services.

Imposition of obligation on Nigerian customer of an NRC to self-account for the VAT

Section 15: Introduction of VAT compliance threshold

Exemption of companies with an annual turnover of 25 million Naira or less from VAT registration and filing obligations.

Section 47: Definition of Goods and Services

Expansion of the definition of goods to include intangible products, property and assets (but excluding land).

Exported and Imported services

Amendment of the definition of exported service to mean “a service rendered within or outside Nigeria by a person resident in Nigeria to a person resident outside Nigeria, provided that a service provided to a fixed base or permanent establishment of a non-resident person in Nigeria shall not qualify as exported service”.

Deletion of definition of imported service.

Companies Income Tax

Section 9: Change of Tax

Introduction of a specialized tax framework for Securities Lending Transactions.

Section 3: Nigerian Company

Expansion of the basis for taxing non-resident companies with significant economic presence in Nigeria by including digital/electronic services and services rendered outside Nigeria to a Nigerian beneficiary.

Section 16: Insurance taxation

Amendment of Section 16 of CITA to place insurance companies on the same level with companies in other sectors by deleting provisions on:

Restriction of deductible claims and outgoings to percentage of total premium.

Restriction of period to carry forward tax losses to four years.

Special punitive deemed profit basis for minimum tax computation.

Restriction of deductible unexpired risk and introduction of time-apportionment basis.

Section 19: Excess Dividend Tax

Rental income received by Real Estate Investment Companies for distribution to their shareholders.

Section 29: Commencement and Cessation basis

Deletion of the old basis for computing basis periods for new businesses and businesses ceasing operation.

Introduction of simplified “actual year basis” for computing basis period during commencement and cessation periods.

Section 33: Minimum Tax

Limitation of the basis for minimum tax computation to turnover, exemption of companies with a gross annual turnover of less than 25 million Naira from minimum tax and repeal of the minimum tax exemption granted to companies with 25% imported equity.

Section 77: Bonus for early payment of CIT liabilities

2% and 1% bonus for a medium-sized and a large company, respectively, where companies income tax liability is paid before 90 days to the due date of filing payment.